Hooking Facebook: Bucks to follow the buzz

Data center's biggest economic boost will come in construction phase

May 18, 2013

Facebook’s massive investment in a new data center in Altoona brings buzz to Iowa, state leaders say. But it also brings bucks to the economy, a report shows.

A state analysis shows the social networking giant’s $300 million investment in a data center should bring a total of nearly $13 million to the state’s economy over the next 12 years.

That impact would triple if the California company builds two more $300 million phases that state leaders expect, said Mike Lipsman, an economist with Strategic Economics Group in West Des Moines. He was not involved in the state analysis.

The revenue department report weighs factors like new worker salaries, sales and use taxes, and corporate income tax against the $18 million in tax credits the state has agreed to give Facebook.

The biggest boost will come in the first two years of construction, when at least 1,000 full-time construction workers build the data center’s first phase, the report projects. Builders are expected to take home the bulk of about $148 million in new income generated from the project.

Facebook is expected to employ 36 workers, the report shows, although it has promised to hire only 31. The state expects the permanent jobs to pay at least $48,100 annually.

Benefits to the state and central Iowa economies shrink after construction ends. “After this thing is in operation, because the number of direct employees are so small, it’s not going to generate a lot of economic activity,” Lipsman said.

The “mid-skill technology jobs” — mostly monitoring, controlling and maintaining the center — are unlikely to spin off other technology jobs, Lipsman said. “In many ways, this facility will be little more than a big warehouse.”

Gov. Terry Branstad said Iowa needs “all kinds of technology jobs” — from data center jobs at Facebook to the research jobs at DuPont Pioneer to engineering positions at Rockwell Collins. “All these jobs also are important. These are the jobs of the future,” he said.

Lt. Gov. Kim Reynolds said the recognition generated from having the $64 billion company choose to locate in Iowa brings attention to Iowa and its growing technology industry. It could ripple into increased investment for startups, she said. “It drives interest. It demonstrates that we’ve invested in an infrastructure” that benefits technology companies.

In addition to Facebook, Google announced last month that its investment in its Council Bluffs data center hit $1.5 billion with its latest $700 million expansion.

Debi Durham, the state’s economic development director, agreed that Iowa gains star power. “Don’t underestimate the brand recognition of having a Facebook or a Google investing in your state. All of a sudden, people outside your world start rethinking Iowa, and that’s a good thing for us,” she said.

Lipsman said one problem with the revenue report is that it fails to take into account a 20-year property tax abatement that Altoona will provide the project.

“The value of the property tax abatement almost certainly dwarfs the value of the state incentives,” even though much of the center’s value — computer servers and other equipment — is exempted from taxes, Lipsman said.

Until after the project is built, Altoona officials have said they’re unsure how much the abatement will benefit Facebook.

“It’s not a bad project, but it’s not a great project, from the point of view of generating a lot of new jobs and new income for the state,” Lipsman said.